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Having inventory has always been important for how you sell on Amazon.
Running out of stock might affect both your advertising approach and your organic ranking.
Inadequate inventory control affects not only the possibility of lost sales but also the quantity of goods that Amazon permits you to ship into the Fulfillment by Amazon (FBA) program.
To find out more, continue reading about:
How your available storage volume is affected by your Inventory Performance Index (IPI) score.
What is the IPI and how is it determined?
Suggestions for raising your IPI rating.
Advice for new Seller Central users who are Amazon sellers.
Based on storage consumption and past sales, Amazon sets storage capacity limits for you:
Maximum Capacity
This restricts the total number of units you can store at Amazon as well as the quantity of inventory you can replenish at Amazon’s FBA facilities in a single shipment.
We do not apply these limitations to accounts that have been in operation for less than 39 weeks.
It is significant to remember that this only applies to accounts that are part of the Professional Seller Plan. The monthly cap for those on individual seller plans is 15 cubic feet.
This caps the amount of storage space in cubic feet that you can have at Amazon.com. Every month, these restrictions are examined and changed.
On the third Monday of each month, any modifications to your storage capacity for that month will be disclosed.
The inventory that is now kept at Amazon, the inventory that is on its way to Amazon, and any shipments that have been planned but have not yet been shipped to Amazon are all included in your storage usage.
The Inventory Performance Index, or IPI, has a significant influence on the Storage Volume.
Later in this post, we’ll go over how your IPI is determined in more detail.
Sellers may have limited storage if they don’t meet the basic requirements. Running with so little storage can seriously impact your sales projections.
We’ll go over the actions you can take to maximize your sales on Seller Central by making sure you have enough storage for your peak demand season.
We’ll also go over your options if you don’t meet Amazon’s requirements.
By visiting Seller Central, choosing Inventory, getting to the Inventory Dashboard, and choosing Inventory Performance from the drop-down menu for Inventory, you can determine your limit.
Amazon claims to take into account the following factors when determining your storage levels:
Increasing Your IPI
Recognize that it will take time to raise your IPI score if it is low.
A rolling average is the IPI. Making preparations in advance is crucial since improving your Amazon score might take anywhere from two to twelve weeks.
This implies that you must act quickly right now if your IPI is lower than the 400 that Amazon demands.
This post will explain how storage restrictions can be harmful, how they occur, and what to do if you already fall below the threshold.
We’ll go into greater detail on Restock Limits later in the course for individuals who are interested in this subject.
Only people who use Seller Central and FBA warehouses will be impacted by the IPI.
It has no bearing on people who use Kindle Direct Platform, Vendor Central, Merchant Fulfilling, or Seller Fulfilled Prime while selling goods on Seller Central.
How effectively you handle and manage your inventory at Amazon is measured by the Inventory Performance Index (IPI).
This measure is a rolling average over 12 weeks. It examines multiple elements over a period of three months.
There are four elements that comprise the Inventory Performance Index (IPI):
This is the most crucial number since it shows you where storage fees and holding expenses for FBA inventory that moves slowly could hurt your revenue.
Sellers can better plan when to remove goods from FBA or refill more by using excess inventory percentages.
When an item’s supply exceeds ninety days in relation to the anticipated demand, it is deemed to have excess inventory.
This measure is exactly what it seems. The following formula is used by Amazon to determine sell-through rates:
(Average Units on Hand Over the Last 90 Days) / (Units Shipped In the Last 90 Days)
Inventory Stranded
This offers details on —-goods that aren’t selling because of listing problems.
When your listing doesn’t adhere to Amazon’s policies, this happens.
Under these circumstances, your products become immobile and you continue to pay FBA storage costs.
Products that have sold more units over the previous 60 days are given more weight by Amazon, which also takes into account the percentage of time your products have been in stock over the last 30 days.
You won’t lose as many sales if you keep a large level of inventory on hand.
The fact that these elements are not equally weighted must be emphasized.
Stranded inventory and restock rates may have a negligible effect on the final score, but excess inventory and sell-through rate are the factors that have the most effects on IPI.
This implies that concentrating only on the first two parts will result in greater movement than dividing your attention equally among the four components.
Amazon raised the minimum IPI to 500 during the pandemic’s peak. Since then, IT has returned to 400 as the minimum IPI.
Amazon, however, has the right to change the minimum IPI desired score at any moment.
We counsel our clients to strive for an overall IPI of 600 as a result.
Achieving at least 50 points above the current IPI standard should be your minimum objective.
It’s easier to maintain a high IPI with some product mixtures than with others. In general, your IPI will be higher if you are a small business with a large number of continuously moving products.
It is hardest to handle if you are a vendor with a broad product mix that shifts frequently.
If you are presently suffering a capacity constraint, you can request that Amazon raise your capacity limit for a certain amount of time. However, this request must be approved by Amazon.
It’s crucial to keep in mind that, should your request for an increase in storage capacity be granted, your account will be charged a “reservation fee” for each cubic foot of additional capacity that is requested. This amount will be applied at the conclusion of the allotted time.
Depending on the amount of sales you made during the time, this cost may be credited (performance credits are earned at a rate of $0.15 for each dollar of sales you make using the additional capacity.)
Another option is to carry on selling goods through merchant fulfillment, work with other independent sellers to transfer your inventory, or ship smaller quantities of your most profitable and quickly-moving inventory to Amazon.
Further down in this article, we will highlight what you can do when your inventory performance is low, you are facing potential inventory limits, or if you’re new to Amazon.
Limiting the quantity of inventory you could sell seems illogical for a corporation that is so focused on putting as many things on its platform as possible.
However, overcrowding at the warehouses started to become a bigger issue for Amazon as more vendors joined the marketplace and as FBA and Prime offers increased.
The affordable storage rates offered by FBA drew Amazon vendors in. The FBA program was being used by sellers as an inexpensive means of storing vast quantities of inventory.
Initially, Amazon attempted to raise storage costs. For goods older than six months, the cost of storage increased significantly with the addition of long-term storage costs.
But despite those adjustments, Amazon was still unable to control the demand and overcrowding in its FBA facilities.
It therefore began implementing storage restrictions in 2019.
From its end, Amazon aims to make sure that users have a positive shopping experience and can easily purchase the things they want.
To do this, make sure the goods that have the highest chance of being sold are in stock.
Amazon assigns you a space based on your past inventory management practices and whether or not people are buying your products.
You will be granted greater storage space in Amazon’s FBA facilities if they determine that you are a better space manager.
These are the steps we advise taking if your IPI is now below the threshold or within 50 points of the lowest threshold.
To begin, make sure the current threshold is met. The IPI threshold is 400 as of the time this article was written.
To determine the current threshold, though, click this direct link to the policy, as Amazon reserves the right to modify it at any time. Under the FBA Inventory Storage Limits category in Seller Support, you may see the most recent needed IPI (login required).
Go to Inventory, Inventory Planning, and then click on your IPI score in Seller Central to discover your current IPI score.
It can take two to twelve weeks to make a major change in the IPI, even with vigorous approaches.
Since excess inventory is the most heavily weighted metric, it is typically one of the top two reasons your IPI score could be poor.
With excess inventory, the first step is to remove items you don’t plan to sell.
Concentrate on stock-keeping units (SKUs) that are no longer in style or goods that are seeing a sharp decline in demand, such as seasonal goods.
You should create a removal order and pull back the inventory to sell on another channel if you don’t think it will sell within three months.
Additionally, you can begin using Multi-Channel Fulfillment (MCF) to process orders from your Amazon stock for your website.
Occasionally, it makes more sense to call back inventory from Amazon rather than discount and/or advertise things to help them sell faster and remove them from your inventory.
Improving a stagnant listing might also aid in raising the sell-through rate.
Just a brief word regarding things that Amazon destroys: occasionally, the company will liquidate the product rather than trash it.
Even though it will cost more, we advise drawing back inventory if inventory control is crucial to your business.
Amazon excels in shipping and organizing things via its system, but it struggles to get things back to sellers.
Receiving departments are frequently overloaded with broken or mixed SKU items that come in many boxes.
If at all possible, we would like to make sure that we’re acting proactively to prevent having to bring back inventory and run the risk of it becoming damaged or being unsalable for an extended period of time.
This is what Amazon looks at to determine whether or not buyers want to buy the products you are selling.
We increase the sell-through rate by sending in small batches of goods that are likely to sell out rapidly.
We advise switching to small parcel shipments throughout this process if you’re currently utilizing LTL or FTL so that you can send more frequently without experiencing prolonged stock outages.
When replenishing your inventory, you should ship limited quantities of things that will sell out as soon as they arrive or shortly after, giving priority to those that will move rapidly.
This makes it possible for your overall sell-through rate to rise sharply and has a big effect on your overall IPI.
No matter how quickly you anticipate a product selling, it is imperative that you test small quantities of these products as you send them in to ensure that sales will proceed as planned.
The inventory that is kept in FBA warehouses and isn’t for sale has an impact on your overall IPI.
Although fixing stranded inventory can have a small impact, this part of the overall measure will not have a big impact if you need to move your IPI significantly.
Weekly or biweekly handling of stranded inventory would be ideal, based on your overall sell-through rate.
Since Amazon is essentially telling you that you can’t resupply things because they’re not selling quickly enough, this is maybe the most annoying IPI metric.
It is attempting to persuade you to make sure you maintain inventory at the same time.
We’ve discovered that this statistic is really light on weight, so it’s best to concentrate on the two most important metrics: sell-through rate and surplus inventory.
The question of whether removing older SKUs can raise this has generated some discussion, although it hasn’t shown to have a major effect on the overall IPI.
It is crucial to keep in mind that it may take many weeks for your overall IPI to rise as you attempt to do so.
The IPI is a 12-week average that is computed.
It is imperative that you allow the IPI sufficient time to progress before assessing the impact of your efforts.
It could be alluring to frequently check your IPI. But your IPI score is only updated once every seven days.
You might have to take really active measures to reduce your inventory and push fast-moving things through your account in order to boost your score to the necessary level if you need to raise your IPI quickly or by a sizable amount.
You may also need to submit a bid for an increase in capacity.
To avoid paying more fees, you should only proceed with this if you have the evidence to back up your ability to sell a larger quantity of things.
This occasionally entails working with independent merchants to guarantee that stock is accessible to clients who qualify for a Prime offer.
Some of the brands we partner with have concentrated on increasing sales of their best-selling SKUs while they raise their capacity restrictions and total IPI score.
Then, as they attempted to raise their averages, they used independent merchants to transport their slower-moving merchandise.
It’s more likely that in the future, there will be a greater need for Flutter while creating online and mobile applications. Flutter’s wide range of capabilities means that it is not limited to the displays of today. Because of its adaptable architecture, it is ideal for new technologies such as wearables, web and desktop applications, and foldable phones.
If there is ever a problem, we may direct our clients to a number of trustworthy third-party resellers.
Because such accounts were receiving goods that was selling much more quickly and were routinely refilling, it follows that those accounts had a faster growth in storage capacity.
You can choose to enhance the overall number of merchant-fulfilled offerings if you choose not to use third-party merchants.
Keep in mind that FBA offers typically outperform Merchant Fulfilled offers, so keep an eye on your competitors to assess viability.
In this case, third-party sellers might be a great tool to make sure you don’t lose potential market share to other competing product lines, even if many businesses avoid them because they may weaken control over their brand.
As they are very profitable and sell out rapidly, you may also devote your FBA warehouse space to the items that have the biggest margin and the smallest dimensional size.
Items that are less profitable or move more slowly through Merchant Fulfilled (MF) are left behind.
Send modest quantities at first if you’re a new seller on Amazon or transferring from Vendor Central to Seller Central.
When you open an account, you have 39 weeks of grace period.
Make sure, though, that you only submit modest quantities of inventory. For each product, a few cases will help you determine the overall sell-through rate.
The minimum quantity to send inventory to Amazon FBA is not specified. Thus, things on Amazon can be tested in as little as one unit at a time.
Smaller shipments do result in higher overall shipping costs and, in the near run, lower profitability.
Sending in lesser amounts, however, might help you better evaluate the demand for your goods when you’re first exploring the platform and help you avoid extra costs that might be necessary to call inventory back or pay for storage.
You can begin to expand the overall sizes of your inventory once you have a better understanding of your sell-through rate.
Maintaining a healthy balance between having too much and too little inventory will help you avoid running out of goods.
Although you should actively work to prevent stockouts in general, the consequences of a poor IPI score should come first.
You have to maintain your Amazon inventory actively if you want to be successful on the platform.
It was sufficient in previous years to just prevent restocks.
But in order to comply with these new rules, you must pay closer attention to tracking your sell-through rate and storage usage on Amazon.
Get ready now to help your Amazon sales and marketing objectives for the upcoming Christmas season.
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